By Tom Wilson and Elizabeth Howcroft
LONDON (Reuters) – Bitcoin near $ 70,000, billion-dollar “memecoins”, successful Wall Street listing and widespread Chinese crackdown: 2021 has been the craziest crypto yet -currencies, even by volatile industry standards.
Digital assets started the year with a rush of cash from investors large and small. And bitcoin and its loved ones have rarely been out of the spotlight since, as the language of crypto has become firmly entrenched in the lexicon of investors.
Here’s a look at some of the top trends that have dominated cryptocurrencies this year.
The original cryptocurrency held its crown as the largest and best-known token – but not without a host of challengers biting its heels.
Bitcoin climbed over 120% from January 1 to a record high of nearly $ 65,000 in mid-April. This was fueled by a tsunami of money from institutional investors, growing acceptance by large corporations such as Tesla Inc and Mastercard Inc, and growing membership from Wall Street banks.
Bitcoin’s purported anti-inflationary qualities have sparked investor interest – its supply is capped – as record stimulus packages fueled the price hike. The promise of quick wins amid record interest rates and easier access thanks to rapidly developing infrastructure, also helped attract buyers.
The main U.S. exchange Coinbase’s $ 86 billion listing in April, the largest to date by a cryptocurrency company, was emblematic of the mainstream adoption of Bitcoin.
“It’s moved into the sphere where it’s traded by the kind of people who take bets on Treasuries and stocks,” said Richard Galvin of crypto fund Digital Capital Asset Management.
Still, the token has remained volatile. It fell 35% in May before hitting a new all-time high of $ 69,000 in November, as inflation skyrocketed in Europe and the United States.
Prominent skeptics remain, JPMorgan boss Jamie Dimon calling it “worthless”. Chart: Peaks and Troughs: Bitcoin Roller Coaster 2021, https://graphics.reuters.com/FINANCE-YEARENDER/mypmnaljavr/chart.png
2 / The rise of memecoins
Even though bitcoin remained the gold standard for investors dipping their toes into crypto, a host of new tokens – some would say jokingly – have entered the industry.
“Memecoins” – a loose collection of coins ranging from dogecoin and shiba inu to squid game that have their roots in web culture – often have little practical use.
Dogecoin, launched in 2013 as a bitcoin spin-off, climbed over 12,000% to an all-time high in May before collapsing nearly 80% in mid-December. Shiba inu, which refers to the same breed of Japanese dog as dogecoin, briefly established itself in the top 10 digital currencies. Graphic: Who let the doge out? https://graphics.reuters.com/FINANCE-YEARENDER/gdvzymlzkpw/chart.png
The memecoin phenomenon was linked to the “Wall Street Bets” movement, where retail traders coordinated online to stack stocks such as GameStop Corp, reducing short positions in hedge funds.
Many traders – often stuck at home with spare money during coronavirus lockdowns – have turned to crypto, even when regulators have issued warnings about volatility.
“It’s all about mobilizing finance,” said Joseph Edwards, head of research at crypto broker Enigma Securities.
“While assets like DOGE and SHIB may in themselves be purely speculative, the money that goes into them comes from an instinct of ‘why shouldn’t I earn on my money, my savings? »» Graphic: Rise of memecoins, https: / /graphics.reuters.com/FINANCE-YEARENDER/klpyknyxwpg/chart.png
3 / Rules: The (big) elephant in the room
As money poured into crypto, regulators worried about what they saw as its potential to enable money laundering and threaten global financial stability.
Long skeptical of crypto – a rebellious technology invented to undermine traditional finance – watchdogs have called for more power over the sector, with some warning consumers of volatility.
With new rules looming, crypto markets were fearful of the possible risk of a crackdown.
When Beijing put restrictions on crypto in May, bitcoin fell almost 50%, dragging the wider market with it.
“Regulatory risk is paramount because these are the rules of the road by which people live and die in financial services,” said Stephen Kelso, global head of markets at ITI Capital. “Regulators are making good progress, they are catching up.”
As memecoin trading went viral, another once-obscure corner of the crypto complex also gained attention.
Non-fungible tokens (NFTs) – strings of code stored in the blockchain’s digital ledger that represent unique ownership of artwork, videos, or even tweets – exploded in 2021.
In March, a digital work by American artist Beeple sold for nearly $ 70 million at Christie’s, among the three most expensive pieces by a living artist sold at auction.
The sale heralded a scramble for NFTs.
Third-quarter sales reached $ 10.7 billion, eight times more than the previous three months. As volumes peaked in August, prices of some NFTs rose so rapidly that speculators could “reverse” them to cash in within days, if not hours.
The surge in crypto prices that spawned a new cohort of crypto-rich investors – along with predictions of a future of online virtual worlds where NFTs take center stage – helped fuel the boom.
The popularity of cryptocurrencies and NFTs may also be linked to declining social mobility, said John Egan, CEO of BNP Paribas-owned research firm L’Atelier, with young people drawn to their potential for quick wins. as soaring prices put traditional assets like homes out of reach.
While some of the world’s biggest brands, from Coca-Cola to Burberry, have sold NFTs, still patchy regulation meant big investors were largely on the sidelines.
“I don’t see a situation where authorized financial institutions actively and aggressively trade (these) digital assets over the next three years,” Egan said. Chart: NFT sales on OpenSea, https://graphics.reuters.com/FINANCE-YEARENDER/CRYPTO-CURRENCY/gdpzymljbvw/chart.png
(Reporting by Tom Wilson and Elizabeth Howcroft; Editing by Chizu Nomiyama)
Copyright 2021 Thomson Reuters.